The proposed filing, by VSP Vision Care of Rancho Cordova, Calif., highlights a major debate in the nonprofit arena over what activities deserve tax exemption when most nonprofit groups charge fees for services and products to supplement their income from charitable donations. Nonprofit health care providers in particular have struggled to distinguish themselves from their for-profit counterparts in recent years as federal lawmakers have questioned why they deserve tax exemptions. State courts have also stripped exemptions from nonprofits, like substance abuse centers and nursing homes, saying they were no different from tax-paying companies providing similar services. “We think this case calls into question the tax-exempt status of a number of tax-exempt organizations,” VSP’s general counsel, Thomas Fessler, said Tuesday. “It’s not just VSP at risk here. It’s other hospitals, other health-maintenance organizations, nursing homes, clinics — there’s a lot of confusion out there.” Lawyers specializing in nonprofit legal matters agreed, but said they still doubted that the Supreme Court would hear the challenge.

Naturally, counsel for VSP overstates the importance of the case and, indeed, his client's legal position. According to one provocative online op-ed, VSP might have been the poster child for what's wrong with granting tax exempt status to health organizations exclusively engaged, or practically so, in fee for service health care. On the other hand, the VSP website states that the organization's community involvement is extensive, including "a national program that provides free eyecare services to low-income and uninsured children, to a paid volunteer program that enables our employees to support worthy causes." The organization claims that it has provided 410,000 low income children free eyecare since 1997. Counsel for VSP may very well have a point, then, in arguing that the case should not have been decided at the summary judgement stage. If their website can be believed, there seems to be as much community benefit derived from VSP as any other nonprofit, tax exempt health care organization. Of course, those mammoth salaries and bonuses -- and apparently unprepared depositions -- referred to in the online op-ed didn't help their case. It may very well be the case that the case was lost because the organization just didn't make a good record during the pretrial stage.

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Comments

This loss of non-profit status is very correct.

Vision service Plan just purchased Marchon Eyewear with non profit monies. It has had a hugh impact on the optical community controling the providers and dis-allowing dispensary firms to participate because they they are non member of the optometry association. They have deep pockets.